Fed cuts rate to near zero
FOR THE WEEK OF MARCH 16, 2020
NATIONAL MARKET UPDATE
Yesterday at 5 p.m. ET, the Federal Reserve cut its benchmark Funds Rate to a range of 0%-0.25%, and pledged to buy $700 billion in Treasuries and mortgage bonds, to bolster the economy against a coronavirus slowdown.
This does not immediately cut fixed-rate mortgage rates, as they’re keyed to bond prices. But the Fed’s bond buying program may increase those prices, which would eventually lower mortgage rates. We’ll see.
In last week’s National Association of Realtors survey, 87% of respondents saw no change in the number of homes on the market, and 37% felt low mortgage rates excited buyers more than the stock market correction.
REVIEW OF LAST WEEK
BIG SWINGS… Thursday, the Dow and S&P 500 took their biggest one-day fall since October 1987, then Friday logged their biggest daily gain since October 2008, after the President declared a national emergency to combat coronavirus.
But Friday’s blowout didn’t offset earlier losses, so the three major stock indexes ended the week solidly down. Concerns over the ultimate human and economic impact of the coronavirus pandemic drove the volatility.
Small Business Optimism rose and inflation and jobless claims fell, indicating current economic strength. Plus, Sunday’s Fed rate cut shows Washington is willing to pull out all the stops to prevent the economy from tanking.
The week ended with the Dow down 10.4%, to 23,186; the S&P 500 down 8.8%, to 2,711 and the Nasdaq down 8.2%, to 7,875.
As stocks rebounded Friday, bonds succumbed to selling pressure and prices fell. The UMBS 4.0% ended down 1.27, to $104.50. The national average 30-year fixed mortgage rate edged up from the prior week’s all-time low in Freddie Mac’s Primary Mortgage Market Survey. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.
DID YOU KNOW?… A recent survey found similarities in homebuyers of different ages. Homeownership is key to 91% of baby boomers and generation X members, and 92% of millennials; plus, 79% of boomers and gen Xers and 81% of millennials say location is more important than home size.
FEDERAL RESERVE WATCH
Forecasting Federal Reserve policy changes in coming months… The Fed’s 1.00% rate drop last night makes it too early to gauge a consensus about future moves. Note: In the lower chart, “NA” indicates the probability of change is not available.
Current Fed Funds Rate: 0%-0.25%
| AFTER FOMC MEETING ON: | CONSENSUS |
| Mar 18 | 0.00%-0.25% |
| Apr 29 | 0.00%-0.25% |
| Jun 10 | 0.00%-0.25% |
Probability of change from current policy:
| AFTER FOMC MEETING ON: | CONSENSUS |
| Mar 18 | NA |
| Apr 29 | NA |
| Jun 10 | NA |
